Loan sizes up
Housing finance figures softened a little in September, down by -0.3 per cent, after a very strong run-up in recent months.
Investment loans were still a very solid 30 per cent higher from a year earlier.
It was interesting to note that the average owner-occupier home loan has increased to surpass previous peaks.
This looks unusual, because loans are typically being stress-tested at absurdly high levels of around 9½ per cent, which borrowers will most likely never pay (and only would pay if nominal incomes surged very considerably higher).
However, because lower income earners are effectively now locked out of the market by lending assessment buffers, this is having the effect of skewing the averages higher and towards wealthier borrowers.
Lending for construction and new homes is off the lows thanks to the investment lending rebound, but remains disappointing for homebuyers, meaning that overall the national dwelling supply shortage continues to worsen (despite the solidly rising approvals in Perth and Melbourne).
Less risky lending
Westpac reported its latest results this morning, which showed that the fixed rate cliff (i.e. the scheduled expiry of fixed rate home loans) peaked way back in September 2023 last year.
Only 11.8 per cent of loans by value across Westpac's loan books were interest-only, down from around half of the entire mortgage book at the peaks.
This means that Australia's debt to household income ratio is falling as most mortgages are seeing the principal being paid down (net of Australia's large offset balances it hasn't increased for nearly two decades).
Overall, 'risky' lending has been almost completely stripped out of the lending market, but you'd be hard pressed to argue that this is reducing systemic risks if the outcome is tent cities and a destabilising housing shortage.
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